• EUR/USD receives upward support from the Fed’s less hawkish stance.
• Fed Governor Christopher Waller mentioned that the central bank may not maintain high policy rates.
• Spain and Germany are expected to report a slowing in the annual inflation rate.

EUR/USD extends its winning streak for the fifth consecutive session, trading around 1.1000 during the Asian session on Wednesday. The EUR/USD pair is benefiting from the softer US Dollar (USD), which is influenced by a less hawkish stance from the US Federal Reserve (Fed).

Market participants are likely to keep a close eye on economic data related to the European Central Bank (ECB) on Wednesday. Spain and Germany are expected to release preliminary Consumer Price Index (CPI) data for November. Both countries are anticipated to report a slowing in the annual inflation rate. Additionally, the European Commission is set to release its Economic Sentiment Indicator, which measures the overall trend of the overall Euro Zone economy.

The US Dollar Index (DXY) continues to lose ground near 102.60, especially given the better-than-expected economic data from the United States (US). The US Housing Price Index (MoM) for September maintaining consistency at 0.6%, exceeding the expected figure of 0.4%, suggests a stable and positive trend in housing prices, reflecting resilience and growth in the housing market. The US CB Consumer Confidence Index experienced an increase in November, reaching 102.0 from the previous reading of 99.1 (Revised from 102.6).

Additionally, the decline in US Treasury yields is cited as an additional negative factor contributing to the weakening of the Greenback. Furthermore, the accommodative remarks from Fed Governor Christopher Waller might have weighed on the Greenback. He suggested that the Federal Reserve may not insist on maintaining high-interest rates if inflation consistently declines.

Investors will focus their shift on the preliminary Gross Domestic Product Annualized for the third quarter in the US. Later in the day, the Federal Reserve will release the Beige Book, which will give a picture of the overall US economic growth.

• Indian Rupee gains traction amid the weaker US Dollar.
• The currency might benefit from inflows since MSCI increased India's weight in its Emerging Market index effective from November 30.
• Investors await the US Gross Domestic Product Annualized data for the third quarter (Q3), due later on Wednesday. 

Indian Rupee (INR) gathers strength on Wednesday on the foreign banks' Dollar sales and a weaker US Dollar (USD). The Indian economy is projected to expand by over 6% this year, bringing its Gross Domestic Product close to $4 trillion. Additionally, India’s economy is anticipated to be the fastest-growing on the globe in the coming years, according to the International Monetary Fund (IMF).

The Indian Rupee potentially benefits from equities inflows due to MSCI's decision to increase India's weight in its Emerging Market index effective from November 30 and analysts expect equity inflows worth $1.5 billion this week. Nonetheless, the rebound in crude oil prices might cap the INR’s upside. It’s worth noting that India is particularly vulnerable to higher crude prices as the country is the world's third-biggest oil consumer.

Market players will monitor the US Gross Domestic Product Annualized for the third quarter (Q3) on Wednesday, which is expected to expand 5.0%. Later this week, the attention will shift to India’s Gross Domestic Product (GDP) Quarterly for the second quarter (Q2), due on Thursday. Furthermore, the last phase of state elections on Thursday remains in focus as a change in government might result in modifications to current policies, which have an impact on investors.

Daily Digest Market Movers: Indian Rupee remains under pressure amid multiple headwinds

• S&P Global Ratings raised India’s growth forecast for the current financial year to 6.4% from 6.0%, citing robust domestic momentum that has offset headwinds from high food inflation and sluggish exports.
• Analysts estimate that India's GDP will grow higher than 6.0% next year, making it the fastest-growing major economy.
• The Reserve Bank of India (RBI) estimated 6.5% growth for July–September, with RBI Governor Shaktikanta Das projecting an upward surprise.
• US CB Consumer Confidence for November climbed to 102.00 versus a downward revision to 99.1.
• Richmond Fed Manufacturing Index showed activity slowed in November, falling to -5.0 from 3.0 in October. 
• The S&P/Case-Shiller Home Price Index grew 3.9% YoY in September versus 2.1% prior, below the market consensus of 4.0%.
• Federal Reserve (Fed) Governor Christopher Waller said the central bank won’t need to raise rates further and may begin cutting rates if inflation continues to ease over the next three to five months.

Technical Analysis: The Indian Rupee maintains a positive outlook

The Indian Rupee trades firmer on the day. The USD/INR pair has traded in a familiar range of 82.80–83.40 since September. USD/INR maintains a bullish vibe as the pair holds above the key 100-day Exponential Moving Average (EMA) on the daily chart. The upward momentum is supported by the 14-day Relative Strength Index (RSI) that holds above the 50.0 midline, reflecting that further upside looks favorable.

The upper boundary of the trading range at 83.40 will be the immediate resistance level for the pair. Further north, the next hurdle to watch is the year-to-date (YTD) high of 83.47, en route to a psychological round figure of 84.00. On the downside, the key contention level will emerge at the 83.00 psychological mark. A breach below this level will pave the way to the confluence of the lower limit of the trading range and a low of September 12 at 82.80, followed by a low of August 11 at 82.60.

• NZD/USD extends gains by almost 1.0% on the day.
• RBNZ held the interest rate at 5.50% for the fifth meeting in November.
• RBNZ emphasizes keeping OCR restrictive to bring inflation back within the 1-3% target range.

NZD/USD continues its winning streak that began on Thursday, trading higher around 0.6190 during the Asian session on Wednesday. However, Reserve Bank of New Zealand (RBNZ) board members held the interest rate steady at 5.50% for the fifth meeting in its November monetary policy meeting. This decision aligns with widespread expectations in the market.

The NZD/USD pair rose almost 1.0%, possibly triggered by the summary of the RBNZ interest rate statement. The statement mentions the possibility of an increase in the OCR if inflationary pressures turn out to be stronger than anticipated.

The RBNZ highlights in its interest rate statement that current interest rates are acting to restrict spending in the economy. The statement notes that consumer price inflation is declining, and this aligns with the Committee's Remit. To meet its objectives, the RBNZ emphasizes the need for the Official Cash Rate (OCR) to remain restrictive, aiming to keep demand growth subdued and bring inflation back within the 1 to 3 percent target range.

The minutes of the Reserve Bank of New Zealand (RBNZ) interest rate meeting reveal several key points. The committee agreed that interest rates will need to remain at a restrictive level for a longer duration. Despite interest rates already being considered restrictive, the committee deemed it appropriate to wait for further data and information before making any adjustments.

There was an acknowledgment that pressure in the labor market is easing, although employment remains above its maximum sustainable level. While certain sectors of the economy are experiencing a slowdown in growth, there has been less of a decline in aggregate demand growth than anticipated earlier in the year. The RBNZ committee highlighted that the estimate of the long-run nominal neutral Official Cash Rate (OCR) has increased by 25 basis points to 2.50%.

Reserve Bank of New Zealand (RBNZ) Governor Adrian Orr shared insights during the post-monetary policy meeting press conference. He mentioned that the meeting with the new Prime Minister was highly constructive. The RBNZ remains steadfast in its stance to hold rates steady through the next year. While the projection shows an upward bias to rates, Orr emphasized that it is not definite and could be subject to change.

Moreover, Governor Orr highlighted that the risk to inflation is leaning more towards the upside, indicating a potential concern about inflation persistently being outside the target band for an extended period.

On the other side, US Federal Reserve (Fed) Governor Christopher Waller's remarks have played a role in the negative momentum for the US Dollar. His comments, suggesting that if inflation consistently declines, there's no need to maintain high interest rates, signal a more accommodative stance from the Federal Reserve.

The US Dollar Index (DXY) reaching its lowest level since August 11 is noteworthy, especially given the better-than-expected Housing Price Index and Consumer Confidence data from the United States. Despite positive economic indicators, the US Dollar is facing headwinds, and the decline in US Treasury yields is cited as an additional negative factor contributing to the weakening of the Greenback.

The September US Housing Price Index (MoM) remained consistent at 0.6%, surpassing the expected figure of 0.4%. This indicates a stable and positive trend in housing prices during that period. The CB Consumer Confidence Index saw an increase in November, reaching 102.0. However, this uptick comes after a downward revision of October figures, which were adjusted from 102.6 to 99.1.

Wednesday is set to bring a new estimate of US GDP growth taking center stage. This data will offer insights into the pace and trajectory of economic expansion during the third quarter. Later in the day, the Federal Reserve will release the Beige Book.

• GBP/USD gains positive traction for the fifth successive day and climbs to a fresh three-month top.
• Bets that the Fed is done raising rates and may start easing the policy in 2024 undermine the USD.
• Diminishing odds for an early BoE rate cut remain supportive of the strong follow-through move-up.

The GBP/USD pair scales higher for the fifth straight day – also marking the eighth day of a positive move in the previous nine – and advances to a fresh three-month peak during the Asian session on Wednesday. Spot prices currently trade around the 1.2715-1.2720 region, up 0.20% for the day, and seem poised to prolong a near three-week-old uptrend in the wake of sustained US Dollar (USD) selling.

The USD Index (DXY), which tracks the Greenback against a basket of currencies, sinks to its lowest level since August 11 amid rising bets for a series of rate cuts by the Federal Reserve (Fed) in 2024. The expectations were reaffirmed by the overnight dovish remarks by Fed Governor Christopher Waller, saying that policy is currently well positioned to slow the economy and get inflation back to the 2% target. Waller added that there are good economic arguments that if inflation continues to decline for several more months, it is possible to lower the policy rate.

Moreover, the CME group's FedWatch tool indicates a 33% chance and a roughly 65% probability of a rate cut in March and May, respectively. This, in turn, drags the yield on the benchmark 10-year US government bond to 4.274%, or its lowest level since mid-September and continues to undermine the buck. Apart from this, a generally positive tone around the US equity futures turns out to be another factor weighing on the safe-haven Greenback and acting as a tailwind for the GBP/USD pair amid diminishing odds for an early rate cut by the Bank of England (BoE).

BoE Governor Andrew Bailey warned last week that it was too early to declare victory over inflation and predicted that monetary policy will have to stay restrictive for quite some time to make sure that inflation gets back to the 2% target. Echoing the view, BoE Deputy Governor for Markets and Banking, Dave Ramsden said on Tuesday that monetary policy is likely to need to be restrictive for an extended period of time to get inflation back to the 2% target. This, in turn, is seen acting as a tailwind for the British Pound (GBP) and contributing to the GBP/USD pair move up.

There isn't any relevant market-moving macro data due for release from the UK on Wednesday, while the US economic docket features the prelim or the second estimate of the third quarter GDP growth figures. This, along with the US bond yields, will influence the USD price dynamics and provide some impetus to the GBP/USD pair. Traders will further take cues from BoE Governor Andrew Bailey's remarks later during the US session to grab short-term opportunities. The fundamental backdrop, meanwhile, remains tilted in favour of bulls and supports prospects for additional gains.

Technical levels to watch

Reserve Bank of New Zealand (RBNZ) Governor Adrian Orr is addressing the post-monetary policy meeting press conference on Wednesday. The RBNZ held the interest rate steady at 5.50% for the fifth meeting in a row in November.

Key quotes

Market reaction

NZD/USD is consolidating its upsurge at around 0.6190 on Orr’s comments. The pair is currently trading at 0.6193, up 0.96% on the day.

• The Japanese Yen strengthens to a two-and-half-month high against the US Dollar on Wednesday.
• Dovish Fed expectations drag the US bond yields lower and continue to weigh on the Greenback.
• The increasing likelihood of a policy shift by the BoJ underpins the JPY and exerts pressure on USD/JPY.

The Japanese Yen (JPY) continues to benefit from the prevalent US Dollar (USD) selling bias, with the USD/JPY pair dropping below the 147.00 mark for the first time since September 14 during the Asian session on Wednesday. The underlying inflation in the United States (US) showed signs of slowing in October and reinforced the market view that the Federal Reserve (Fed) was probably done raising interest rates. Adding to this, dovish remarks from some Fed officials on Tuesday boosted rate cut bets and triggered a fresh leg down in the US Treasury bond yields, dragging the USD to a 3-1/2-month low.

The JPY, on the other hand, is underpinned by strengthening expectations that the end of the Bank of Japan’s (BoJ) negative interest rate policy is approaching. The bets were lifted by data last week, which showed that Japan’s key inflation measure accelerated for the first time in four months and stayed above the BoJ's 2% target for the 19th straight month. This is seen as another factor contributing to the USD/JPY pair's downfall for the fourth successive day. That said, a positive risk tone, which tends to dent demand for safe-haven assets, including the JPY, could lend some support and help limit losses.

Daily Digest Market Movers: Japanese Yen remains supported by weaker USD and hawkish BoJ expectations

• Federal Reserve Governor Michelle Bowman said on Tuesday that she remains willing to support raising interest rates should the incoming data indicate that progress on inflation has stalled.
• New York Fed President John Williams said that longer-term inflation expectations have been encouragingly steady, but did not make any forward-looking comments about monetary policy.
• Fed Governor Christopher Waller said that there are good economic arguments that if inflation continues to decline for several more months, it is possible to lower the policy rate.
• Waller added that he was increasingly confident that policy is currently well positioned to slow the economy and get inflation back to the central bank's 2% target.
• The dovish remarks reaffirm the market view that the Fed is done with its policy-tightening campaign and may begin cutting interest rates in the middle of 2024.
• On the economic data front, the Conference Board's US Consumer Confidence Index rose to 102 in November from the previous month's downwardly revised reading of 99.1.
• Consumers' 12-month inflation expectations fell to 5.7% from 5.9% in October, in contrast to the University of Michigan's survey last week that long-term inflation expectations rose in November to levels last seen in 2011.
• The Bank of Japan, meanwhile, will almost certainly end its negative interest rate policy by early next year in the wake of persistently high inflationary pressures.

Technical Analysis: USD/JPY seems vulnerable to slide further, 100-day SMA support breakdown in play

From a technical perspective, a break below the 100-day Simple Moving Average (SMA) pivotal support near the 147.00 mark could be seen as a fresh trigger for bearish traders. Moreover, oscillators on the daily chart have been gaining negative traction and are still far from being in the oversold territory. This, in turn, suggests that the path of least resistance for the USD/JPY pair is to the downside and supports prospects for deeper losses. Hence, a subsequent fall towards the 146.50-146.40 intermediate support, en route to the 146.00 round figure, looks like a distinct possibility.

On the flip side, any recovery attempt now seems to confront stiff resistance and remain capped near the 147.30-147.35 barrier. That said, a sustained strength beyond might trigger a short-covering rally and allow the USD/JPY pair to reclaim the 148.00 round figure. The momentum, however, runs the risk of fizzling out rather quickly near the 148.30 strong horizontal support breakpoint, now turned resistance.

Bank of Japan (BoJ) board member Seiji Adachi made some comments on the central bank’s inflation and monetary policy outlook, during his speech on Wednesday.

Key quotes

Market reaction

USD/JPY is keeping its recovery momentum intact on the above comments, currently trading at 146.93, still down 0.37% on the day. The pair hit a two-month low of 146.68 in early Asia.

• Australian Dollar continues its winning streak despite downbeat Aussie monthly CPI.
• Australia’s Monthly Consumer Price Index declined by 4.9% in October against the expected 5.2%.
• US Dollar Index loses ground despite the better-than-expected US economic data.

The Australian Dollar (AUD) is on a winning streak, extending its gains for the fifth consecutive day on Wednesday. This surge is attributed to a heightened risk appetite in the market and the upward movement in commodity prices. Additionally, the softer US Dollar (USD), influenced by a less hawkish stance from the US Federal Reserve (Fed), is providing support to the AUD/USD pair.

Australia's Monthly Consumer Price Index (CPI) for October shows a reading of 4.9%, a decrease from the previous reading of 5.6% in September and slightly below the expected 5.2%. While the downbeat data have initially exerted some pressure, it seems that the Australian Dollar (AUD) has managed to recover from that pressure.

The US Dollar Index (DXY) has dipped to its lowest level since August 11 despite the better-than-expected Housing Price Index and Consumer Confidence data from the United States (US). The decline in US Treasury yields acted as an additional negative factor for the Greenback.

Fed Governor Christopher Waller’s comments, suggesting that if inflation consistently declines, there's no need to insist on maintaining high interest rates, further fueled the negative momentum for the Greenback.

Daily Digest Market Movers: Australian Dollar extends its gains despite downbeat Aussie data, softer US Dollar

• Australia’s seasonally adjusted Retail Sales data showed monthly readings for October, which declined by 0.2% against the market expectations of a 0.1% rise and 0.9% prior.
• Reserve Bank of Australia (RBA) Governor Michele Bullock highlighted that the current monetary policy is on the restrictive side, with rate hikes putting a damper on demand, particularly in the context of persistent services inflation.
• Governor Bullock emphasized the need for caution in employing high interest rates to combat inflation without inadvertently raising the unemployment rate.
• The People's Bank of China (PBoC) has issued a notice to strengthen financial support for private firms. This comprehensive support encompasses assistance for private enterprises in listing and financing, mergers and acquisitions, as well as restructuring.
• Federal Open Market Committee (FOMC) meeting minutes revealed that members decided unanimously to keep policy restrictive for some time until there is clear and sustainable evidence of inflation moving down toward the Committee's target.
• US Housing Price Index (MoM) remained consistent at 0.6% in September against the expected figure of 0.4%.
• The CB Consumer Confidence Index experienced an increase in November, rising to 102.0. This uptick comes after a downward revision of October figures, which were adjusted from 102.6 to 99.1.

Technical Analysis: Australian Dollar maintains its position above 0.6650 major level

The Australian Dollar trades higher around the 0.6670 level on Wednesday. The next significant resistance lies at the psychological level of 0.6700. A breakthrough above this level could potentially support the AUD/USD pair, allowing it to test the region around August's high at 0.6723. On the downside, the key support is positioned at 0.6650, followed by the seven-day Exponential Moving Average (EMA) at 0.6601. A decisive break below the EMA could potentially push the pair to reach the support near the 23.6% Fibonacci retracement level at 0.6569.

AUD/USD: Daily Chart

On Wednesday, the People’s Bank of China (PBoC) set the USD/CNY central rate for the trading session ahead at 7.1031 as compared to the previous day's fix of 7.1132 and  7.1340 Reuters estimates.

Australia’s monthly Consumer Price Index (CPI) eased to 4.9% in the year to October 2023, as against the annual increase of 5.6% seen in September, the Australian Bureau of Statistics reported on Wednesday.

The market had expected an increase of 5.2% in the reported period.

Market reaction

At the time of press, the AUD/USD pair was down 0.05% on the day at 0.6641. 

About Australian CPI

The Monthly Consumer Price Index (CPI), released by the Australian Bureau of Statistics on a monthly basis, measures the changes in the price of a fixed basket of goods and services acquired by household consumers. The indicator was developed to provide inflation data at a higher frequency than the quarterly CPI. The YoY reading compares prices in the reference month to the same month a year earlier. A high reading is seen as bullish for the Australian Dollar (AUD), while a low reading is seen as bearish.